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As we have discussed here before, there are many steps that a personal injury claim may go through before it actually becomes a court case and that only a very small percentage of personal injuries ever go before a jury. The reason for this is that the majority of personal injury claims are settled, by a negotiated settlement, long before going to court.

The courts strongly encourage this in order to lighten the burden on an already overloaded system and while your attorney should always be prepared to take your claim to trial, there are advantages to negotiating a settlement. Negotiated settlements offer much more flexibility than court-ordered settlements and depending on how they are arranged, can offer both long term and tax advantages to the injured party.

In this article, we will look at the advantages offered by of one of the most common forms of negotiated settlements, the structured settlement.

What are Structured Settlements?

In simple terms, a structured settlement is an agreement between the plaintiff and the defendant, or his insurance company. The injured party agrees to forgo further litigation in exchange for regular payments over the course of several years or for the rest of the plaintiff’s life. A smaller lump sum payment, to take care of immediate needs, plus a long term arrangement may also be an option.

These arrangements can be very advantageous to people who have suffered catastrophic injuries as they will one, provide long-term income and two, prevent the feast and famine syndrome that many times strikes when people suddenly receive large sums of money.

Below are some of the advantages associated with this type of settlement.

Pros associated with a Structured Settlement

Tax Avoidance

While under the U.S. Tax Code personal injury settlements are considered tax free, if there are punitive damages, like those associated with negligence claims, involved those monies are taxable. Beyond this, any interest your money may earn is also considered income and therefore taxable.


Being, in essence, a contract for payment, virtually any conditions that can be dreamt can be included in the agreement. Future cost of living increases and medical advancements are just a couple of contingencies that can be included in the agreement.


Federal law prohibits insurance companies from declaring bankruptcy and most states, including Florida, have a guaranty association that further safeguards your payments.

Ease of Settlement

Structured settlements are generally easier to negotiate than lump sum payments. While it is never easy to get an insurance company to part with money, it is much easier for your attorney to negotiate a settlement that includes smaller sums spread over many years than a single large lump sum.

When an insurance company looks at a settlement, they not only see the number in front of them, but also the potential loss of the income that they would have gained by investing that money. By stretching that perceived loss out over a period of time, in their minds, they are limiting that loss and possibly even saving money as future payments will be made with inflated dollars. This makes it much easier to bring them to the table with a more reasonable attitude.

Structured Settlements can be more than a little complicated to work out and should only be entered into on the advice of a qualified personal injury attorney. With all of the flexibility that is inherent in them, their details must be reviewed and then reviewed again, to be sure all of the little details match what has been agreed to. To steal two old phrases, “The devil is in the details” and “If it’s not in writing it doesn’t exist”. Insurance company lawyers are masters of this game.